A document submitted by incorporators when applying for a charter is known as:
A) articles of incorporation.
B) charter.
C) proxy.
D) stock certificate.
Boxes R’ Us paid $5,000 in salaries and wages for February. This transaction will:
A) increase expenses and decrease revenue.
B) increase expenses and increase liabilities.
C) decrease assets and increase expenses.
D) Increase assets and expenses.
Beginning and ending inventories are $900 and $800, respectively. The income
statement debit and credit columns of the worksheet total $2,500 and $2,500,
respectively, not including the adjustment amounts for beginning and ending
inventories. The net income or loss for the period is:
A) $150 net income.
B) $150 net loss.
C) $100 net income.
D) $100 net loss.
Patterson Research has 200 shares of 10%, $100 par value, preferred stock, and 2000
shares of $10 par value common stock outstanding. Total paid-in capital is $42,000, and
retained earnings are $0. There are one-year dividends in arrears on preferred stock. The
book value per share on common stock is:
A) $10.
B) $40.
C) $20.
D) $9.
Noble Company’s accounts receivable turnover was 24.6 in Year 1 and 18.2 in Year 2.
This change in accounts receivable turnover indicates:
A) the company is not selling its inventory as fast.
B) the company is selling its inventory faster.
C) the company’s customers are paying faster.
D) the company’s customers are paying slower.
Total wages per week are $4,800. You need to accrue $5,000 of wages. The adjusting
entry would include which of the following?
A) Credit Wages Expense, $5,000; debit Wages Payable, $5,000
B) Debit Wages Expense, $5,000; credit Wages Payable, $5,000
C) Debit Wages Expense, $4,800; credit Wages Payable, $4,800
D) Debit Wages Expense, $4,800; credit Cash, $4,800
Sigma reports net credit sales of $400,000. There is a credit balance of $1,000 in the
Allowance for Doubtful Accounts. Uncollectible accounts are estimated to be 2.5% of
net credit sales. Under the income statement approach, the adjusting entry would
require a debit to Bad Debt Expense for:
A) $9,000.
B) $10,000.
C) $9,975.
D) some other number.
Bright Garden Center had the following data for May:
Use four decimal places. The cost of the estimated inventory on May 31 under the retail
method is:
A) $3,500.00.
B) $2,871.50
C) $2,187.50
D) $500.00
On March 15, Ben Jones negotiated a $25,000 bank loan for 270 days at an interest rate
of 8%.
Required (show your calculations):
a) Determine the due date of the note.
b) Calculate the amount of interest charged by the bank.
c) Calculate the maturity value of the note.
Johnson issues a $5,000, 7%, 100-day promissory note to Adam on November 1. What
is the adjusting entry made by Johnson on December 31 to recognize the interest (using
a 360-day year)?
A) Debit Interest Expense; credit Interest Payable for $58.33
B) Debit Interest Expense; credit Interest Payable for $97.22
C) Debit Interest Receivable; credit Interest Income for $58.33
D) Debit Interest Receivable; credit Interest Income for $97.22
Alpha Corporation’s has 1,500 shares of $40 par, 7% cumulative preferred stock and
2,200 shares of $10 par common stock. Alpha paid $12,000 in cash dividends including
one-year dividends in arrears to preferred stockholders. Common stockholders will
receive:
A) $0.
B) $7,800.
C) $1,600.
D) $3,600.
A company has four departments (A, B, C and D) and the net sales are $30,000;
$40,000; $60,000 and $25,000 respectively. The cost of goods sold per department is
$25,000; $15,000; $40,000 and $15,000 respectively. What department has the lowest
gross profit?
A) A
B) B
C) C
D) both A and D
The candy department experienced the following revenue and expenses during October:
The candy departmental net income is:
A) $6,400.
B) $3,500.
C) $4,200.
D) $5,300.
Bond Indenture:
A) is a special type of long-term interest-bearing note payable issued by a corporation
to raise capital.
B) is the annual interest rate based on face value.
C) is the amount to be paid on the maturity date of a bond.
D) is the information on the bond certificate written by the corporation in a formal
agreement.
The current ratio for a company with current assets of $120,000, current liabilities of
$50,000, total assets of $150,000, and net sales of $80,000, would be:
A) 3.0.
B) 0.416.
C) 2.4.
D) 0.333.
The statement of cost of goods manufactured does NOT include:
A) direct labor costs.
B) selling and administrative costs.
C) manufacturing overhead.
D) All of the above are included.
In the basic formula for calculating interest on a promissory note, principal refers to:
A) the original amount – the discount.
B) the amount of interest to be paid.
C) the original amount loaned or borrowed.
D) the maturity value.
The amount of Accounts Receivable a company expects it will collect is the:
A) Gross Accounts Receivable.
B) Bad Debts Allowance.
C) Bad Debts Expense.
D) Net Realizable Value.
The advantage of the weighted-average method is:
A) an equal cost is assigned to each unit so net income does not fluctuate as much as
with other methods.
B) flow of goods and flow of costs are the same.
C) it matches current selling prices and current costs.
D) old costs are matched against current income.
Net sales equal:
A) gross sales.
B) gross sales – sales returns and allowances.
C) gross sales – sales returns and allowances – sales discounts.
D) gross sales – gross profit.
An item that can be converted into cash or used up during the normal operating cycle is:
A) a current asset.
B) Revenue.
C) a current liability.
D) a long-term liability.
No entry was recorded for the exchange of stock for land. This error would cause:
A) the period end stockholders’ equity to be understated.
B) the period end stockholders’ equity to be overstated.
C) the period’s end assets to be understated.
D) Both A and C are correct.
Martin Company needs additional time to pay its accounts payable to Boster Company.
Martin makes a written promise to pay Boster the amount on a certain date. Martin
records this transaction as follows:
A) debit Notes Payable; credit Accounts Payable.
B) debit Cash; credit Accounts Payable.
C) debit Accounts Payable; credit Notes Payable.
D) debit Notes Payable; credit Cash.
What is the internal control advantage of using the net method of accounting for
merchandise purchases?
A) It highlights the inefficiency of losing purchase discounts.
B) It guarantees that all purchase discounts will be taken.
C) It automatically increases a firm’s cash balance.
D) It results in a higher quality of inventory on hand for customers.
The inventory method where the ending inventory consists of oldest costs is:
A) LIFO.
B) FIFO.
C) weighted-average.
D) specific invoice.
Colleen’s account was written off for $800. She received an inheritance from her uncle
and wants to clear her account. The entry to record this is to:
A) debit Cash and credit Accounts Receivable/Colleen.
B) debit Allowances for Doubtful Accounts, credit Accounts Receivable/Maggie, debit
Cash, and credit Accounts Receivable/Colleen.
C) debit Accounts Receivable/Colleen, credit Allowance for Doubtful Accounts, debit
Cash, and credit Accounts Receivable/Colleen.
D) debit Accounts Receivable/Colleen, credit Allowance for Doubtful Accounts, debit
Accounts Receivable/Colleen, and credit Cash.
Fidelity Furniture’s Net Income was $25,000. Other accounts that changed included:
Accounts Receivable increased by $18,000; Merchandise Inventory decreased by
$7,000; Accounts Payable increased by $4,000; and Salaries Payable decreased by
$3,000. The amount of Net Cash Flow from Operating Activities using the indirect
method is:
A) $57,000.
B) $43,000.
C) $37,000.
D) $15,000.
Treasury stock should usually be recorded at:
A) par or stated value.
B) cost.
C) original issue price.
D) net realizable value.
Discount on Bonds Payable is a:
A) contra-asset account.
B) contra-liability account.
C) liability account.
D) None of these answers is correct.
Which of the following expenses is the most difficult to allocate to departments?
A) Cost of goods sold
B) Use of general supplies by everyone
C) Salaries and wages
D) Merchandise purchases
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
Why is Revenue increased on the Credit side? (Explain as it pertains to the expanded
accounting equation and its relationship to Owner’s Equity.)
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the nature of the
account (permanent/temporary).
Example:
Prepare journal entries for the following petty cash fund transactions:
Nov. 1 Established a $75 petty cash fund.
15 Increased the petty cash fund to have a new balance of $100.
30 Replenished the petty cash fund. Currency and coins remaining were $30. Approved
paid vouchers were: $10 donation expense; $16 postage expense; $30 office supplies
expense; and $20 misc. expense.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement that the account in which the account balance is reported, and in Column 4
the account’s nature (temporary/permanent).
Plymouth Sharks Hockey Accessories had the following transactions involving the sale
of merchandise. You are to prepare the necessary general journal entries. All sales are
subject to a 6% sales tax and have a 2/10, n/30 discount terms.
December 2 Sold merchandise priced at $100 to Cathy Norton on account.
December 4 Sold merchandise priced at $125 to a cash customer.
December 10 Payment from Cathy Norton received.
December 16 Cash customer returned $40 worth of merchandise.
Prepare the necessary general journal entry for December 2.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
On June 2, Sandoval Corporation purchased $9,000 of merchandise from Johnston
Company, terms 3/10, n/30 and prepared voucher #402. Sandoval returned $400 of the
supplies on June 8, because of poor quality. Sandoval cancelled voucher #402 and
replaced it with #415.
Required: Prepare journal entries to record the above transactions. Assume Sandoval
uses the net method for recording purchases. Omit explanations. Sandoval uses the
periodic method.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement in which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
Kristi’s Mentoring had the following information for the pay period ending September
30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the total employer’s payroll tax.
For each of the following items, indicate (by placing an X) whether the item would be
found on the statement of cash flows in column 1, the direct approach for determining
the cash flows from operating activities, column 2, the indirect approach for
determining the cash flows from operating activities, column 3, cash flows from
investing activities, column 4, cash flows from financing activities. If you identify that
an item affects the cash flows from operation, indirect method, also indicate whether it
will be increasing (+) or decreasing (-) the cash flows.
A piece of paper held by a bondholder showing evidence of a bond issued by a
corporation is called a(n) ________.
The Bixby Co. had the following transactions involving the purchase of merchandise.
Prepare the necessary general journal entries. Any applicable freight costs are prepaid
by the seller. The perpetual inventory method is in use.
June 16 Purchased merchandise having a price of $6,000 from the Shelby
Manufacturing Co.
on account with credit terms 2/10, n/30. Transportation terms F.O.B destination.
June 16 Purchased merchandise having a price of $9,000 from the Ajax Supply House
on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point.
The freight costs of $175 were added to the invoice. Merchandise was shipped June 16.
June 17 Received the goods from Shelby.
June 17 Received the goods from Ajax.
June 20 Returned for credit merchandise with an invoice price of $800 to Ajax.
June 25 Paid Shelby the amount owed.
June 28 Paid Ajax the amount owed.
June 30 Returned for cash, merchandise with an invoice price of $400 to Shelby.
Prepare the necessary general journal entry for June 16, Purchased merchandise having
a price of $6,000 from the Shelby Manufacturing Co. on account with credit terms 2/10,
n/30. Transportation terms F.O.B destination.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Below is a list of expenses; you are to identify each as either [1] a direct expense or [2]
an indirect expense.
Paint for the restaurant dining room. ________
On November 30, the balance in the Supplies account was $500. During December
additional supplies were purchased of $200. On December 31, there was $200 worth of
Supplies on hand. What would be the adjustment for the month of December for
Supplies?
$ ________
Using the following accounts:
[1] Cash
[2] Bond Sinking fund
[3] Equipment
[4] Building
[5] Land
[6] Accounts payable
[7] Notes payable
[8] Bond payable
[9] Bond interest payable
[10] Premium on bonds payable
[11] Discount on bonds payable
[12] Common stock
[13] Retained earnings
[14] Sinking fund earned
[15] Bond interest expense
[16] Gain on retirement
[17] Loss on retirement
Indicate the account(s) to be debited and credited to record the following transactions.
Issued bonds at face value in exchange for buildings and land.
Debit ________ & ________ Credit ________
Using the following accounts:
[1] Cash
[2] Subscription receivable-common stock
[3] Machinery
[4] Building
[5] Land
[6] Organization costs
[7] Preferred stock
[8] Common stock
[9] Paid in capital in excess of par value – preferred
[10] Paid in capital in excess of par value – common
[11] Common stock subscribed
[12] Discount on common stock
[13] Organization Expense
Indicate the account(s) to be debited and credited to record the following transaction.
Exchanged common stock for services of corporation organizers (valued at par).
Debit ________ Credit ________
From the following accounts, prepare in proper form a post-closing trial balance for
Logan’s Pet Sitting on December 31. (Note: These balances are before closing).
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the nature of the
account (permanent/temporary).
Example:
